Q1 2025 G-III Apparel Group Ltd Earnings Call
Okay.
Operator: Good day, and thank you for standing by. Welcome to the G-III Apparel Group First Quarter Fiscal 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode.
Good day, and thank you for standing by.
Speaker Change: I'll come to G. III apparel group first quarter fiscal 2025 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session. Just a question during the session you will need to press star one.
Operator: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 when on your telephone. You will then hear an automatic message advising your hand is raised.
Speaker Change: Good morning, and telephone he will then hand automatic message.
Speaker Change: Great.
Operator: Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Mr. Neal Nackman, Chief Financial Officer. Please go ahead.
Speaker Change: Please note that today's conference is being recorded I will now.
Speaker Change: The conference I'll, let you speak of homes.
Speaker Change: Chief Financial Officer. Please go ahead Sir.
Neal S. Nackman: Good morning, and thank you for joining us. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal security laws. Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in forward-looking statements. Important factors that could cause actual results of operations or the financial condition of the company to differ are discussed in the documents filed by the company with the SEC. The company undertakes no duty to update any forward-looking statements.
Speaker Change: Good morning, and thank you for joining us before.
Speaker Change: Before we begin I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward looking statements within the meaning of the federal Securities laws.
Speaker Change: Forward looking statements are not guarantees and actual results may differ materially from those expressed or implied in forward looking statements.
Speaker Change: Important factors that could cause actual results of operations or the financial condition of the company to differ are discussed in the documents filed by the company with the SEC.
Speaker Change: The company undertakes no duty to update any forward looking statements. In addition, during the call. We will refer to non-GAAP net income non-GAAP net income per diluted share and adjusted EBITDA, which are all non-GAAP financial measures. We have provided reconciliations of these non-GAAP financial measures to GAAP measures in our press release.
Neal S. Nackman: In addition, during the call, we will refer to non-GAAP net income, non-GAAP net income per diluted share, and adjusted EBITDA, which are all non-GAAP financial measures. We have provided reconciliations of these non-GAAP financial measures to GAAP measures in our press release, which is also available on our website. I will now turn the call over to our Chairman and Chief Executive Officer, Morris Goldfarb. Thank you, Neal, and thank you everyone for joining us.
Speaker Change: Which is also available on our website.
Speaker Change: I'll now turn the call over to our chairman and Chief Executive Officer Morris Goldfarb.
Morris Goldfarb: Thank you Neil and thank you everyone for joining us.
Morris Goldfarb: For our first quarter, we delivered net sales in line with our expectations and bottom-line results well ahead of our guidance. These results are due to our unwavering commitment to disciplined brand building and operational excellence. Leveraging the design and merchandising strengths of our team, we achieved profitable sales growth by focusing on innovative products and assortments for our collection. Despite a dynamic and challenging consumer environment, we continue to see strong opportunities across our business.
Morris Goldfarb: For our first quarter, we delivered net sales in line with our expectations and bottom line results well ahead of our guidance.
Morris Goldfarb: These results are due to our unwavering commitment to disciplined brand building and operational excellence.
Morris Goldfarb: Leveraging the design and merchandising strengths of our team we achieved profitable sales growth by focusing on innovative products and assortments for our collections.
Morris Goldfarb: Despite a dynamic and challenging consumer environment, we continued to see strong opportunities across our business.
Morris Goldfarb: I'm proud of our best-in-class team who demonstrate resilience and agility every day as we advance our long-term strategic priorities. Before I review our first quarter results... Let me provide some further details on this morning's announcement of our partnership with AWWG, a portfolio company primarily owned by M1 Group, Elkaterton, and founder Carlos Ortega. AWWG is a global fashion group and a premier platform for international brands, generating revenues of approximately $650 million.
Morris Goldfarb: I am proud of our best in class team, who demonstrated resilience and agility every day as we advance our long term strategic priorities.
Morris Goldfarb: Before I review, our first quarter results, let me provide some further details on this morning's announcement of our partnership with AWD W. G. A portfolio company, primarily owned by one group L Catterton and founder Carlos Ortega.
Morris Goldfarb: With this investment, we have an ownership interest of just over 12%; by year-end, we expect to own close to 20%, and we'll look to expand the ownership over time. With a strong European infrastructure and management team, AWWG has over 3,500 points of sales globally and a presence in 86 countries. They are the owner of Hackett, Pepe Jeans, and Fasunab and manage the Iberian business for PVH. With our partnership, AWWG will also become the agent for Karl Lagerfeld, DKNY, and Donna Karan across Spain and Portugal.
Morris Goldfarb: WWE G as a global fashion group and Premier platform for international brands generating revenues of approximately $650 million.
Morris Goldfarb: With this investment we have an app, we have an ownership interest of just over 12% by year end, we expect to own close to 20% and we will look to expand the ownership over time.
Morris Goldfarb: With a strong European infrastructure and management team AWD WG has over 3500 points of sales globally and a presence in 86 countries.
Morris Goldfarb: They are the owner of Hackett.
Speaker Change: Genes and fashion and.
Speaker Change: Manage the Iberian business for PVH.
Speaker Change: With that partnership AWD WG will also become the agent for Karl Lagerfeld, DKNY, and Donna Karan across Spain, and Portugal.
Morris Goldfarb: They bring an understanding of brand and product management, as well as operational excellence, aligning well with our strategic initiative to expand our European presence. In addition, AWWG has a strong presence in India, one of the fastest growing fashion markets in the world.
Speaker Change: They bring an understanding of brand and product management as well as operational excellence aligning well with our strategic initiative to expand our European presence.
Speaker Change: Further AWD WG has a strong presence in India, one of the fastest growing fashion markets in the world.
Morris Goldfarb: We believe that we can leverage them as our partner to expand DKMY and our other brands in that market. They will benefit from our best-in-class operational capabilities in North America to secure a more meaningful foothold here for their brand. We will also hold one seat on AWWG's board to help advise the company and look forward to working with the leadership team to leverage our collective strength. Our investment will expand both of our businesses. We expect this investment to be accretive from the start.
Speaker Change: We believe that we can leverage them as our partner to expand DKNY and our other brands in that market.
Speaker Change: They benefit from our best in class operational capabilities in North America to secure a more meaningful foothold here for their brands.
Speaker Change: We will also hold one seat on AWD Wg's board to help advise the company and look forward to working with the leadership team to leverage our collective strengths.
Speaker Change: Our investment will expand both of our businesses. We expect this investment to be accretive from the start.
Morris Goldfarb: Now let's review our first quarter 2025 financial results. Net sales for the quarter were $610 million compared to $607 million last year and in line with our expectations. Gross Margin Rate Expanded 130 Bases. The Gross Margin Rate for our own brands is substantially higher than the PVH rate. Non-GAAP earnings per diluted share was $0.12 compared to $0.13 last year and well ahead of our expectations.
Speaker Change: Now, let's review, our first quarter 2025 financial results.
Speaker Change: Net sales for the quarter was $610 million compared to $607 million last year and in line with our expectations.
Speaker Change: Gross margin rate expanded 130 basis points.
Speaker Change: The gross margin rate for our own brands is substantially higher than the PVH brands.
Speaker Change: non-GAAP earnings per diluted share was <unk> 12.
Compared to <unk>, <unk> last year, and well ahead of our expectations.
Morris Goldfarb: Our inventory remains in a good position, down approximately 24% from last year's first quarter. As we announced this morning, we have upsized and extended the maturity of our evolving credit system. We remain in a very strong financial position, ending the quarter with cash and availability of approximately $1 billion.
Speaker Change: Our inventory remains in good position down approximately 24% from last year's first quarter.
Speaker Change: As we announced this morning, we have upsized and extended the maturity of our revolving credit facility.
Speaker Change: We remain in a very strong financial position ending the quarter with cash and availability of approximately $1 billion.
Morris Goldfarb: Performance in the first quarter was driven by strong double-digit sales increases in DKNY and Carl Lagerfeld. Despite challenging weather, we're pleased with the spring selling season so far. We continue to meet the ever-changing needs of our customers by reinforcing our omni-channel capabilities, which is reflected in the strong performance of our wholesale business. Additionally, a North American retail business transformation is underway, and we're gaining traction with both Karl Lagerfeld Paris and DKNY stores seeing strong double-digit comp increases.
Speaker Change: Performance in the first quarter was driven by strong double digit sales increases and DKNY and Karl Lagerfeld.
Despite challenging weather, we are pleased with the spring selling season to date.
Speaker Change: We continue to meet the ever changing needs of our customers by reinventing an arrow in our omnichannel capabilities.
Speaker Change: Which is reflected in the strong performance of our wholesale business.
Speaker Change: Additionally, our north American retail business transformation is underway and we're gaining traction with both Karl Lagerfeld, Paris, and DKNY stores seeing strong double digit comp increases.
Morris Goldfarb: Growing brands is a core capability of ours, and we remain on track for net sales of our go-forward portfolio to approach approximately 70% of our total sales for the full fiscal 2025, as we continue to reduce the penetration of Calvin Klein and Tommy Hilfiger, a best-in-class design and product development team. Field merchandisers, marketing, and overall investments in our brands are key differentiators for G-III. These capabilities make us a partner of choice to retailers who have confidence in our ability to execute and deliver the right product at the right time.
Speaker Change: Growing brands as a core capability of ours and we remain on track for net sales of our go forward portfolio to approach approximately 70% of our total sales for the full fiscal 2025, as we continue to reduce the penetration of Calvin.
Speaker Change: Client and Tommy Hilfiger.
Speaker Change: Our best in class design and product development teams field merchandisers marketing and overall investments in our brands are key Differentiators for G. III.
Speaker Change: These capabilities make us a partner of choice to retailers who are.
Speaker Change: Our confidence in our ability to execute and deliver the right product at the right time.
Morris Goldfarb: This is clearly evident as retailers are supporting our evolution by allocating their purchasing dollars to our go-forward businesses through significant door count and floor space expansion. This fall, we expect to add over 2,500 points of sale at our retail partners across better department stores as we expand categories and launch new brands.
Speaker Change: This is clearly evident as retailers are supporting our evolution by allocating their purchasing dollars to add go forward businesses through significant door count and floor space expansion.
Speaker Change: This fall, we expect to add over 202500 points of sale at our retail partners across better Department stores, as we expand categories and launch new brands.
Morris Goldfarb: These efforts have directly translated into sales growth, which we expect to continue as we scale these businesses. As part of our focus on our own brands, we made our largest and most visible investments in marketing, which has already resulted in increased global interest and sales that have exceeded our expectations. Our brands, particularly Donna Karan, already have strong established brand equity.
These efforts have directly translated into sales growth, which we expect to continue as we scale these businesses.
Speaker Change: As part of our focus on our own brands, we made our largest and most visible investments in marketing, which have already resulted in increased global interest in sales that have exceeded our expectations.
Our brands, particularly Donna Karan already strong established brand equity.
Morris Goldfarb: These supercharged campaigns serve to re-energize and create excitement amongst consumers. We're continuing the momentum and plan to invest meaningfully in marketing to further drive brand equity, accelerate sales, and increase resonance for the long term. As previously mentioned, we relaunched Donna Karan with new designs along with an updated website and new fragrance collection, which has been extremely well-received season-to-date.
Speaker Change: These supercharge campaigns.
Speaker Change: To re energize and create excitement amongst consumers.
Speaker Change: We are continuing the momentum and plan to invest meaningfully in marketing to further drive brand equity accelerated sales and increase residence for a long term.
Speaker Change: As previously mentioned, we relaunched Donna Karan with new designs, along with an updated website and new fragrance collection, which has been extremely well received season to date.
Morris Goldfarb: On average, Donna Karan's AURs are significantly higher, sell-throughs are about 50% better, and retailer margins are double-digit higher than our other businesses, making it our most successful launch to date. Almost immediately, our retail partners have accelerated their investment in the brand, which expanded door counts and floor space. We launched in about 200 doors and are expanding to over 500 doors in the fall.
Speaker Change: On average Donna Karan's AUR is a significantly higher sell throughs are about 50% better on retailer margins and double digit higher than our other businesses, making it our most successful launch to date.
Speaker Change: Almost immediately our retail partners have accelerated their investment in the brand, which expanded door counts and floor space.
Speaker Change: We launched in about 200 doors and are expanding to over 500 doors in the fall.
Morris Goldfarb: We're incredibly pleased to see Donna Karan exceeding our expectations. As mentioned, this relaunch was supported by a powerful marketing campaign with some of the biggest names in fashion, including Cindy Crawford, Linda Evangelista, Carolyn Murphy, Amber Valletta, and Karlie Kloss, which brought the story of the brand's iconic legacy back to life with renewed relevance. The resulting $7.4 billion impressions equated to more than $15 million in earned marketing value and drove significant industry and consumer engagement.
Speaker Change: We are incredibly pleased to see Donna Karan exceeding our expectations.
Speaker Change: As I mentioned this re launch was supported by a powerful marketing campaign with some of the biggest names in fashion, including Cindy Crawford, Linda vaginal Lisa Carolyn Murphy Amber Valletta, and currently clause, which brought the story of the brand's iconic legacy.
Speaker Change: C back to life with renewed relevance.
Speaker Change: The resulting seven 4 billion impressions equates to more than $15 million and earned marketing value and drove significant industry and consumer engagement.
Morris Goldfarb: We're currently working on several initiatives to expand into complementary categories through licensing to better-in-class foreigners. A fragrance business with Interparfum is expected to grow by strong double digits, supported by a brand launch. This important licensing extension further supports visibility, attracting new and wider audiences to the world of Donna Karan. This is just the beginning.
Speaker Change: We're currently working on several initiatives to expand into complementary categories through licensing to better class better in class partners.
Speaker Change: Our fragrance business within <unk> is expected to grow by strong double digits supported by brand launches.
Speaker Change: This important licensing extension further supports visibility attracting new and wider audiences to the world of Donna Karen. This is just the beginning we see many opportunities ahead for this business globally.
Morris Goldfarb: We see many opportunities ahead for this business globally. DKNY delivered strong double-digit increases this quarter. The brand's Spring Marketing campaign featuring Kaia Gerber, who brings excitement and fresh energy to the brand and is driving more brand engagement through her social platforms and boosting DKNY's relevance and affinity amongst younger audiences globally. We further elevated visibility by re-establishing a long-term partnership with the New York Yankees. DKNY is now prominently featured on the right field billboard, enhancing visibility at the stadium, as well as on broadcast TV and social media channels.
Speaker Change: DKNY delivered strong double digit increases this quarter.
Speaker Change: The brand's spring marketing featuring <unk> Gerber, who brought excitement of fresh energy to the brand and it is driving more brand engagement through her social platforms, and boosting DKNY as relevance and affinity amongst younger audiences globally.
Speaker Change: We further elevated visibility by reestablishing our long term partnership with the New York Yankees.
Speaker Change: DKNY is now prominently featured on the right field Billboard enhancing the visibility at the stadium as well as on broadcast television and social media channels.
Morris Goldfarb: In April, DKNY launched the Heart of New York Capsule Collection with a series of international pop-up shops and events, which we believe further reinforces our European expansion across key wholesale accounts. This capsule featured exclusive events and dedicated space in La Renachente, Harrods, and Zalando, as well as our DKNY freestanding boutique. DKNY is well established as a lifestyle brand, reaching a broader and younger audience across the globe, especially in Europe.
Speaker Change: And April DKNY launched the heart of New York Capsule collection with a series of international pop up shops, and events, which we believe further reinforces our European expansion across key wholesale accounts.
Speaker Change: This capsule featured exclusive events and dedicated space in.
Speaker Change: <unk>, Harrods, and zelle endo as well as add DKNY III standing boutiques.
Speaker Change: DKNY as well established as a lifestyle brand, reaching a broader and younger audience across the globe, especially in Europe.
Morris Goldfarb: We're creating energy around key activations, which help us deliver excitement and newness, driving brand awareness and engagement. In Asia, we're repositioning the DKY brand in China. We're pleased with the double-digit growth in Korea this quarter and are evaluating other opportunities to accelerate our growth in the broader Asian market. Karl Lagerfeld grew by almost 50% in North America this quarter. A truly incredible start to the year.
Speaker Change: We're creating energy around key activations, which help us deliver excitement and newness driving brand awareness and engagement.
Speaker Change: In Asia, we are repositioning the DKNY brand in China.
Speaker Change: We're pleased with the double digit growth in Korea, this quarter and are evaluating other opportunities to accelerate our growth in a broader Asian market.
Speaker Change: Karl Lagerfeld grew by almost 50% in North America this quarter truly incredible start to the year.
Speaker Change: We further build out the brand's lifestyle collection launching this suit separates category and expanding doors for the dress category, resulting in approximately 500 new points of distribution for Karl Lagerfeld.
Morris Goldfarb: We further built out the brand's lifestyle collection, launching the Suit Separates category and Expanding Doors for the Dress category, resulting in approximately 500 new points of distribution for Carl Lagerfeld. The brand will now be prominently featured in a total of 1,200 points of distribution across the Better Departments store space in just North America.
Speaker Change: The brand will now be prominently featured in a total of 1200 points of distribution across the better Department store space in just North America.
Speaker Change: Globally.
Morris Goldfarb: Our reach continues to grow through wholesale and entry into new markets and categories like the recently launched Karl Lagerfeld jeans line, in collaboration with Sustainability Ambassador Amber Valletta. We introduce the latest collection for Fall 2024, featuring bags created from Mirum, a cutting-edge sustainable leather alternative. This summer, we will capture some of the Olympic buzz by partnering with new sports, such as the new sport of three-on-three basketball, which is being included in this year's game.
Speaker Change: Our reach continues to grow through wholesale and entry into new markets and categories like the recently launched Karl Lagerfeld Jeans line.
Speaker Change: In collaboration with sustainability Ambassador Amber Valletta.
Speaker Change: We introduced the latest collection for fall 2024, featuring bags created from Marin.
Speaker Change: Our cutting edge sustainable leather alternative.
Speaker Change: This summer we will capture some of the Olympic Buzz by partnering with new sports.
Speaker Change: With the new sport of three on three basketball, which is being included in this year's games.
Morris Goldfarb: We will sponsor several playoff tournaments, launch a product collaboration, and host athletes in our Paris store. We're also revamping our global flagship store on London's Regent Street with a fresh concept just in time for September Fashion Week. And please be on the lookout for a mini-series releasing tomorrow on Hulu called Becoming Karl Lagerfeld.
Speaker Change: We will sponsored several playoff tournaments.
Speaker Change: <unk> launched a product collaboration and host athletes and that Paris store.
Speaker Change: We're also revamping our global flagship store in London's Regent Street with a fresh concept just in time for September fashion week.
Speaker Change: I am pleased to be on the lookout for mini series, releasing tomorrow on Hulu call, becoming Karl Lagerfeld.
Speaker Change: This.
Morris Goldfarb: This series chronicles the early career of our iconic legendary designer, Carl Lagerfeld. We continue to leverage the power of the Karl Lagerfeld name to extend the lifestyle appeal and international awareness of the brand while delivering incremental licensing revenue. Our launch of luxury villas in the heart of Dubai will be Karl Lagerfeld's inaugural real estate project in the Middle East.
Speaker Change: This series chronicles the early career of our iconic legendary designer Karl Lagerfeld.
Speaker Change: We continue to leverage the power of the Karl Lagerfeld name to extend the lifestyle appeal and international awareness of the brand while delivering incremental licensing revenue.
Speaker Change: Our launch of luxury villas and the heart of Dubai.
Speaker Change: We will be Karl Lagerfeld inaugural real estate project in the Middle East. Additionally, we're capitalizing on licensing opportunities in key categories, and we will be launching an additional fragrance in July.
Morris Goldfarb: Additionally, we're capitalizing on licensing opportunities in key categories and will be launching an additional fragrance in July. VILBRACAN remains focused on extending its lifestyle product categories, licensing opportunities, and expanding its beach club concept. During the quarter, Vilvercan opened a third store in Palma, Spain, and a beach club in Abu Dhabi.
Speaker Change: <unk> remains focused on extending its lifestyle product categories licensing opportunities and expanding its beach club concept.
Speaker Change: During the quarter <unk> opened a third store in Palma, Spain, and a beach club in Abu Dhabi.
Morris Goldfarb: We continue to build upon our Beach Club experiences, which feature our shops and expect to drive business this summer. We are developing new products for existing and new categories heading into the peak selling season. Since taking over the beach club in Cannes, we're pleased with the sales and profitability improvements to date. Currently, we have seven beach club projects in various stages of opening, and we are making progress toward our goal of opening 15 partner-operated beach clubs in exclusive global locations over the next three years.
Speaker Change: We continue to build upon our beach club experiences.
Which feature our shops and expect to drive business. This summer.
Speaker Change: We are developing new products for existing and new categories heading into the peak selling season.
Speaker Change: Since taking over the Beach club and Con, we're pleased with the sales and profitability improvements to date.
Currently we have seven beach club projects in various stages of developing and are making progress toward our goal of opening 15 partner operated beach clubs and exclusive global locations over the next three years.
Morris Goldfarb: We've been able to quickly develop our new initiatives with Nautica, Halston, and Champion Outerwear. The consumer response to our Nautica Spring Jeans collection has been positive and will be expanding to a broad range of additional categories over time. We're looking forward to our Holsten Lifestyle Collection and Champion Outwear hitting retail floors this fall. Our brands, DKNY, Donna Karan, Karl Lagerfeld, and WilburKahn have tremendous runways. In the last fiscal year, these brands, along with the rest of our go-forward portfolio, resulted in $1.8 billion in net sales, and together with our new launches, we see a $5 billion long-term net sales potential. Additionally, AWWG represents a sizable international opportunity from a revenue and infrastructure perspective.
Speaker Change: We've been able to quickly develop our new initiatives with nautica Halston and champion outerwear.
Speaker Change: The consumer response to our Nordic as spring Jeans collection has been positive and we will be expanding to a broad range of additional categories over time.
Speaker Change: We're looking forward to our halston lifestyle collection and champion outerwear hitting some retail floors. This fall.
Speaker Change: Our brands DKNY, Donna Karan Karl Lagerfeld them, Deborah can have tremendous runway.
Speaker Change: And the last fiscal year. These brands along with the rest of our go forward portfolio resulted in $1 $8 billion in net sales.
Speaker Change: Together with our new launches, we see a $5 billion long term net sales potential.
Speaker Change: Additionally, AWD WG represents a sizable international opportunity from a revenue and infrastructure perspective.
Morris Goldfarb: We have strong growth ahead between the organic acceleration of our brands and our new opportunities. In conclusion, we have a solid start to fiscal year 2025, delivering non-gap earnings that beat our expectations. We're controlling the controllables while utilizing a data-driven approach to strategically invest in our brands to drive profitability and long-term brand health. Looking ahead, we continue to believe that the consumer environment will remain under pressure and remain cautiously optimistic.
Speaker Change: We have strong growth ahead between the organic acceleration of our brands and our new opportunities.
Speaker Change: In conclusion.
Speaker Change: We have a solid start to our fiscal year 2025, delivering non-GAAP earnings that beat our expectations.
Speaker Change: We're controlling the controllable while utilizing a data driven approach to strategically invest in our brands to drive profitability and long term brand health.
Speaker Change: Looking ahead, we continue to believe that the consumer environment will remain under pressure and remain cautiously optimistic.
Morris Goldfarb: We're reaffirming our top line while raising our bottom line guidance and now expect earnings per diluted share to be in the range of $3.58 to $3.68. Our proven track record of success and our strong balance sheet give us ample flexibility to invest in our business. We're making good progress on many of our objectives, including strong results delivered through the outside performance of our own brands, DKNY, Karl Lagerfeld, and the successful relaunch of Donna Karan, our announced partnership with AWWG, which accelerates our international expansion, a reduced reliance on the PVH grant, and the turnaround plans for the retail sector.
Speaker Change: We are reaffirming our top line, while raising bottomline guidance and now expect earnings per diluted share to be in the range of $3 58.
Speaker Change: The $3 68.
Speaker Change: Our proven track record of success and our strong balance sheet give us ample flexibility to invest in our business.
Speaker Change: We're making good progress on many of our objectives, including our strong results delivered through outside performance of our own brands DKNY, Karl Lagerfeld, and the successful relaunch of Donna Karan.
Our announced partnership with AWD, WG, which accelerates our international expansion.
Our reduced reliance on the PVH brands.
Speaker Change: And the turnaround plans for the retail segment.
Morris Goldfarb: We have significant long-term opportunities to expand our business, and I'm confident that this is just the beginning. I'll now pass the call to Neal for a discussion of our first quarter, as well as our fiscal 2025 outlook. Thank you, Morris.
Speaker Change: We have significant long term opportunities to expand our business and I am confident that.
Speaker Change: That this is just the beginning.
Neal: I will now pass the call to Neal for a discussion of our first quarter as well as our fiscal 2025 outlets.
Neal: Thank you Morris net sales for the first quarter ended April 32024 were $610 million compared to $607 million in the same period last year and in line with our expectations.
Neal S. Nackman: Net sales for the first quarter ended April 30, 2024, were $610 million compared to $607 million in the same period last year, and in line with our expectations. Net sales of our wholesale segment were $598 million compared to $587 million in the previous year. Net sales of our retail segment were $31 million for the quarter compared to net sales of $30 million in last year's first quarter, despite the closing of nine doors.
Neal: Net sales of our wholesale segment were $598 million compared to $587 million in the previous year.
Speaker Change: Net sales of our retail segment were $31 million for the quarter compared to net sales of $30 million in last year's first quarter. Despite the closing of nine doors.
Neal S. Nackman: Gross margin percentage was 42.5% in the first quarter of fiscal 2024 compared to 41.2% in the previous year's first quarter. The wholesale segment's gross margin percentage was 40.9% compared to 39.9% in last year's comparable quarter.
Speaker Change: Our gross margin percentage was 42, 5% in the first quarter of fiscal 2024 compared to 41, 2% in the previous year's first quarter.
Speaker Change: The wholesale segment gross margin percentage was 49% compared to 39, 9% in last year's comparable quarter.
Neal S. Nackman: We continue to drive gross margins through a combination of growth in our higher-margin go-forward brands and product mix. Gross margin percentage in our retail operations segment was 47% compared to 50.9% in the prior year's period. Non-GAAP SG&A expenses were $237 million compared to $226 million in the previous year's first quarter.
Speaker Change: We continue to drive gross margins through a combination of growth of our higher margin go forward brands and product mix.
Speaker Change: Gross margin percentage in our retail operations segment was 47% compared to 59% in the prior year's period.
Speaker Change: non-GAAP SG&A expenses were $237 million.
Speaker Change: Compared to $226 million in the previous year's first quarter.
Neal S. Nackman: As you recall, we guided a higher investment in expenses for this year, primarily associated with marketing for Donna Karan and DKNY and the expansion of our operational capabilities through technology and talent investment. The marketing expenses are weighted to the first and third quarters in line with the spring and fall marketing campaign. While marketing expenses were up in the first quarter, they were slightly lower than we had planned. In addition, there was a shift of some marketing spend from the first quarter to the second quarter.
Speaker Change: As Youll recall, we had guided a higher investment and expenses for this year, primarily associated with the marketing for Donna Karan and DKNY and the expansion of our operational capabilities to the technology and talent investments and.
Speaker Change: Marketing expenses are weighted to the first and third quarters in line with the spring and fall marketing campaigns.
Speaker Change: While marketing expenses are up in the first quarter there were slightly lower than we had planned. In addition, there was a shift of some marketing spend from the first quarter to the second quarter.
Neal S. Nackman: These increases were partially offset by better than expected efficiencies in our warehousing operations driven by disciplined inventory management. Non-GAAP net income for the first quarter was $5.8 million or $0.12 per diluted share compared to $6 million or $0.13 per diluted share in the previous year's first quarter.
Speaker Change: These increases were partially offset by better than expected efficiencies in our warehousing operations driven by disciplined inventory management.
Speaker Change: non-GAAP net income for the first quarter was $5 8 million or <unk> 12 per diluted share compared to $6 million or <unk> 13 per diluted share in the previous year's first quarter.
Neal S. Nackman: These results were significantly better than our expectations, driven by improvements in gross margin percentage and efficiencies in our SG&A. Turning to the balance sheet, we continue to make good progress with respect to our inventory level. Inventory decreased 24% to $480 million at the end of the quarter from the previous year's $630 million.
Speaker Change: These results were significantly better than our expectations driven by improvements in gross margin percentage and efficiencies in our SG&A.
Speaker Change: Turning to the balance sheet, we continue to make good progress with respect to our inventory levels inventory decreased 24% to $480 million at the end of the quarter from the previous year $630 million.
Neal S. Nackman: Our inventory levels are well aligned with future sales. We ended the quarter with a net cash position of approximately $80 million compared to a net debt position of $253 million in the prior year's first quarter. This swing from a net debt to a net cash position is primarily a result of cash flows from operations, which includes a large decrease in our inventory level. During the quarter, we bought back $28 million of our stock.
Speaker Change: Inventory levels are well aligned with future sales.
Speaker Change: We ended the quarter with a net cash position of approximately $80 million compared to a net debt position of $253 million in the prior year's first quarter.
Speaker Change: This swing from a net debt to a net cash position is primarily a result of cash flows from operations, which includes the large decrease in our <unk>.
Speaker Change: Inventory levels.
Speaker Change: During the quarter, we bought back $28 million of our stock.
Neal S. Nackman: We remain in a very strong financial position with approximately $1 billion of liquidity. The cost of our investment in AWWG will be reflected in our second quarter. As we announced this morning, we have further solidified our capital structure with an upsized amendment and five-year extension of our asset-based revolving credit facility from $650 million to $700 million. This maturity extension further provides flexibility to invest in our business and pursue additional strategic opportunities.
Speaker Change: We remain a very strong financial position with approximately $1 billion of liquidity.
Speaker Change: The cost of our investment in AWP <unk> will be reflected in our second quarter.
Speaker Change: As we announced this morning, we have further solidified our capital structure with an upsized amendments and five year extension of our asset based revolving credit facility from $650 million to $700 million.
Speaker Change: This maturity extension further provides flexibility to invest in our business and pursue additional strategic opportunities.
Neal S. Nackman: That's for our guidance. We are pleased with our first quarter results and remain cautiously optimistic about the remainder of the fiscal year. For the full fiscal year 2025, we are reaffirming our net sales guidance of approximately $3.2 billion, a growth of approximately 3% compared to the previous year's net sales, driven by our own brands and launchers of the new initiative. Importantly, this growth is happening as sales of Calvin Klein and Tommy Hilfiger continue to decline.
Speaker Change: As for our guidance, we are pleased with our first quarter results and remain cautiously optimistic about the remainder of the fiscal year.
Speaker Change: For the full fiscal year 2025, we are reaffirming our net sales guidance of approximately $3 2 billion.
Speaker Change: A growth of approximately 3% compared to the previous year's net sales driven.
Speaker Change: Driven by our own brands and launches of the new initiatives.
Speaker Change: Importantly, this growth is happening our sales of Calvin Klein and Tommy Hilfiger continue to decline.
Neal S. Nackman: For fiscal 2025, we continue to anticipate sales of our go-forward portfolio to represent approximately 70% of our total net sales. The second half sales guidance reflects a higher rate of growth, which is attributable to both the planned organic growth in our existing go-forward brands, as well as our new launch. On a non-GAAP basis, we are raising our guidance to reflect our outperformance in the first quarter and now expect net income for fiscal 2025 of between $170 and $175 million, or between $3.58 and $3.68 per diluted share. This compares to non-GAAP mid-income of $190 million, or $4.04 per diluted share, for fiscal 2024.
Speaker Change: For fiscal 2025, we continue to anticipate sales of our go forward portfolio to represent approximately 70% of our total net sales.
Speaker Change: The second half sales guidance reflects a higher rate of growth, which is attributable to both the planned organic growth in our existing go forward brands as well as our new launches.
Speaker Change: On a non-GAAP basis, we are raising our guidance to reflect our outperformance in the first quarter and now expect net income for fiscal 2025 of between 170 $175 million or between $3 58, and $3 68 per diluted share.
Speaker Change: This compares to non-GAAP net income of $190 million or $4 <unk> per diluted share for fiscal 2024.
Neal S. Nackman: Fiscal 2025 adjusted EBITDA is expected to be between $295 and $300 million compared to adjusted EBITDA of $324 million in fiscal 2024. As previously mentioned, we continue to expect incremental expenses of approximately $60 million, primarily related to marketing expenses, to support the launch of Donna Karan and further drive brand engagement for DKNY, as well as investments in technology and talent to expand our operational capabilities. For the second quarter of fiscal year 2025, we expect net sales of approximately $650 million compared to $660 million in the same period of fiscal 2024.
Speaker Change: Fiscal 2025, adjusted EBITDA is expected to be between 295 and $300 million compared to adjusted EBITDA of $324 million in fiscal 2024.
Speaker Change: As previously mentioned, we continue to expect incremental expenses of approximately $60 million, primarily related to marketing expenses to support the launch of Donna Karan and further drive brand engagement for DKNY as well as investments in technology and talent to expand our operational capabilities.
Speaker Change: For the second quarter of fiscal year 2025, we expect net sales of approximately $650 million compared to $660 million in the same period of fiscal 2024.
Neal S. Nackman: We expect non-GAAP net income per diluted share for the second quarter of fiscal 2025 to be between $10 million and $15 million, or between $0.22 and $0.32 per diluted share. This compares to non-GAAP net income of $19 million, or $0.40 per diluted share, in fiscal 2024.
Speaker Change: We expect non-GAAP net income per diluted share for the second quarter of fiscal 2025 to be between $10 million and $15 million or between 22 and 32 per diluted share. This compares to non-GAAP net income of $19 million or <unk> 40 per diluted share in fiscal 2024.
Neal S. Nackman: Let me provide some additional context around modeling. As for the gross margin rate, for the second quarter, we expect gross margins to be up as compared to the previous year, but not as much as in the first quarter. For the third quarter, we expect gross margins to be down as a result of the mix of programs, including a greater concentration of sales of our licensed brands. So, taken together, as we had noted last quarter, we continue to expect the full fiscal year 2025 gross margin rate to be similar to fiscal year 2024.
Speaker Change: Let me provide some additional context around modeling.
Speaker Change: As for the gross margin rate for the second quarter, we expect gross margins to be up as compared to the previous year, but not as much as the first quarter.
Speaker Change: For the third quarter, we expect gross margins to be down as a result of the mix of programs, including a greater concentration of sales of our licensed brands. So taken together as we had noted last quarter. We continue to expect the full fiscal year 2025 gross margin rate to be similar to fiscal year 2024.
Neal S. Nackman: Regarding SG&A, in line with our previous plan, we continue to make several investments to support the growth of our business for the long term, with future marketing spend expected to be skewed higher in the third quarter in line with the full marketing campaign and related activations. Additionally, we continue to expect capital expenditures of approximately $50 million. This is higher than our spend in previous years, principally driven by the build-outs of shop-and-shops for our new brand launches and new technology to support our business. We are estimating a tax rate of 28.5% for fiscal 2025, and we have not anticipated any future potential share repurchases in our guidance.
Speaker Change: Regarding SG&A in line with our previous plan, we continue to make several investments to support the growth of our business for the long term with the future marketing spend expected to be skewed higher in the third quarter in line with our fall marketing campaign and related Activations.
Speaker Change: We continue to expect capital expenditures of approximately $50 million. This is higher than our spend in previous years, principally driven by the build outs of shop in shops for our new brand launches and new technology to support our business.
Speaker Change: We are estimating a tax rate of 28, 5% for fiscal 2025.
Speaker Change: And we have not anticipated any future potential share repurchases in our guidance.
Neal S. Nackman: That concludes my comments. I will now turn the call back to Morris for closing remarks. Thank you, Neal, and thank you all for joining us today. I'm proud of what the team continues to achieve and confident in G-III's future as a global leader in fashion. I'd also like to thank our entire organization, our many partners, and all our stakeholders for their continued support. Operator, we're now ready to take some questions.
Speaker Change: That concludes my comments I will now turn the call back to <unk> for closing remarks.
Speaker Change: Thank you Neil and thank you all for joining us today.
Neil: I am proud of what the team continues to achieve and confident in <unk> future as a global leader in session.
Neil: I'd also like to thank our entire organization, our many partners and all our stakeholders for their continued support.
Speaker Change: Operator, we're now ready to take some questions.
Neal S. Nackman: Ladies and gentlemen, if you'd like to ask a question at this time, you'll want to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 1-1 again.
Speaker Change: Ladies and gentlemen, if you would like to ask a question at this time you wanted to Quest Star one on your telephone and weekly name to be announced.
Speaker Change: This concludes today's Baldwin one again, please standby, while we compile the Q&A roster.
Operator: Please stand by while we compile the Q&A roster. And our first question comes from the line of Ashley Owens with KeyBank Capital Markets. Your line is open. Hi, good morning. I guess maybe just start on the top line.
Speaker Change: Now first question coming from the line of actually Owens with Keybanc capital markets. Your line is open.
Ashley Anne Owens: We heard from Macy's already that there's been a good response to Donna Curran with price resistance and the expanded distribution of a few other brands. Carl and DKNY are holding up nicely as well. Is there anything that maybe came in a little soft from a brand or category perspective relative to your expectations that was offset by these other brands? And then second, just hoping you guys could speak to the level of comfortability with the order book today and what you're seeing out in the market in terms of buys, if there's been any shift in the past three months at all. Thank you. Thank you for your question.
Ashley Anne Owens: Hi, Good morning, I guess, maybe just start on the topline we heard from macys already that they're seeing good response, the Donna Karan with price resistance and expanded distribution with other brands.
Speaker Change: Why are holding up nicely as well.
Speaker Change: Maybe came in a little soft from a broader category perspective relative to your expectations that was offset by these brands and.
Speaker Change: And then second just hoping you guys.
Speaker Change: Level of comfort ability with the order book today, and what you're seeing.
Speaker Change: The market in terms of buys.
Speaker Change: Thank you.
Morris Goldfarb: Our brands are all doing well. I can't think of a brand, including Tommy Hilfiger and Calvin Klein, which are brands that there's no secret that we're exiting. They're all doing well.
Speaker Change: Thank you for your question.
Speaker Change: Our brands are all doing well.
Speaker Change: Thank you.
Speaker Change: Our brand, including Tommy Hilfiger, and Calvin Klein, which are brands that.
Speaker Change: There is no secret that we're exiting.
Speaker Change: They are all doing well our business.
Morris Goldfarb: Our business, pretty much all of our larger brands, which include Calvin, Tommy, DKNY, Karl Lagerfeld, the launch of Donna Karan, some of our private label initiatives, they're all working. I can't cite a disappointing brand in terms of sales or progress for the future. So, we're in a really good space, you know; we're gathering, you know, the seeds of the past, and we're planting new seeds for the future, and, you know, both areas are working.
Speaker Change: Pretty much on our.
Speaker Change: Larger brands, which include Calvin and Tommy DKNY, and Karl Lagerfeld launch of Donna Karan.
Speaker Change: Some of our private label initiatives.
Speaker Change: They are all working.
Speaker Change: I can't cite a disappointing brand and sales of our progress through the future.
Speaker Change: So we're in a really good space.
Speaker Change: Sure.
Speaker Change: We're garnering.
Speaker Change: <unk> sees as the past.
Speaker Change: We're planting new seeds for the future in both areas and working.
Morris Goldfarb: As far as our order book is concerned, our order book is fine. We're in line with what's happened historically. My view is, as the door count expansion for Donna Karan and Karl Lagerfeld and maybe we catch a little bit of our new licenses with Nautica and Champion and Halston, I think Autobrook will grow exponentially in maybe the fourth quarter.
Speaker Change: As far as our order book.
Speaker Change: Our auto book is fine.
Speaker Change: We're in line with what's happened historically.
Speaker Change: My view is as the door count expansion for Donna Karan Karl Lagerfeld.
Speaker Change: Maybe we catch a little bit of a new licenses with the.
Speaker Change: Monica.
Speaker Change: Champion and Halston.
Speaker Change: I think our order book will grow.
Speaker Change: I think exponentially and maybe it's the fourth quarter.
We're chasing.
Morris Goldfarb: We're chasing production for the demand that we've created for Donna Karan. The door expansion for Karl Lagerfeld came a little faster than we expected, so we're trying to match our production with the demand, and I believe that our Autobrook expansion will be much more obvious in the future. Great, thanks so much.
Speaker Change: Production for the demand that we've created on <unk>.
Speaker Change: Donna Karan.
Speaker Change: Our expansion for Karl Lagerfeld came a little faster than we expected.
Speaker Change: So we're trying to match our production with the demand and I believe that.
Speaker Change: Our order book expansion will be much more obvious in the coming months.
Speaker Change: Great. Thanks, so much.
Speaker Change: Thank you.
Ashley Anne Owens: And our next question coming from the line of... Will Gardner with Wells Fargo, Yelena Solkin. Hey, hey, guys. Great. Thank you for my question. Just wanted to follow up on what Ashley asked. I mean, you guys guided, maybe asked me in a different way, you guys guided 1Q $615 million. It came in a little light.
Speaker Change: And our next question coming from the line of.
Speaker Change: Darden with Wells Fargo. Your line is now open.
Speaker Change: Okay great.
Speaker Change: Great.
Speaker Change: Taking my question.
Speaker Change: I'm just wondering.
Speaker Change: Brian I'll, let Ashley.
Speaker Change: You guys guided maybe asking a different way you guys <unk>.
Yelena Solkin: Can you, can you just talk about what this was, what the drag in the quarter was? Yeah, well, look, we have an approximate range of where we expect sales to be. Of course, we would always love to beat them.
Speaker Change: $650 million came in a little light can you can you just talk about what what was what was the drag in the quarter.
Speaker Change: Yeah, well look we.
Speaker Change: We have an approximate range of where we expect sales to be of course, we would always love to beat them.
Morris Goldfarb: And I'm sure that, you know, it's a wholesale business with a lot of activity that happens at the end of our quarter. We could have very easily been ahead of this with a few orders that came in 24 hours earlier. So we were very comfortable with where we came in on the top line, very comfortable, again, with what we see for the order book and what we see in the rest of the business as far as the top line is concerned. We're talking about a relatively small amount that possibly finds its way into Q2.
Speaker Change: And I'm sure that the wholesale business with a lot of activity that happens at the end of our quarter could have very easily been ahead of this with a few orders that came in 24 hours earlier. So we were very comfortable with where we came in topline very comfortable again with what we see for the order book and what we see in the rest of the business as far as top line.
Speaker Change: We're talking about relatively.
Speaker Change: A relatively small amount.
Speaker Change: That <unk>.
Speaker Change: Possibly.
Speaker Change: Finds its way into Q2.
Morris Goldfarb: We're dealing with transit times that were altered slightly; we're dealing with conservative retailers that are measuring the inventory levels that they'd like to have at the end of the quarter. So all of that, it's not an exact science, as you know, and we're pretty pleased with where we wound up.
Speaker Change: We're dealing with transit times, our altered slightly.
Speaker Change: It's dealing.
Speaker Change: With.
Speaker Change: Conservative retailers that are measuring the inventory levels.
Speaker Change: Like to have at the end of the quarter. So all of that.
Speaker Change: It's not an exact science as you know.
Speaker Change: And we're pretty pleased with where we wound up.
Yelena Solkin: And just, just on the two, the second half guide, it looks like, you know, it's a pretty substantial ramp from where you are in 1-H. Just can you, can you frame what's giving you confidence? Sounds like you have some launches in the pipeline, and you're expanding distribution. Just can you, can you sort of frame out what gives you the confidence to hit that sort of mid-single digit, is that what I'm backing into for the second half?
Speaker Change: Got it.
Speaker Change: And just just on the on the two.
Speaker Change: Second half guide it looks like it's a pretty substantial ramp from where you are in <unk>.
Speaker Change: You.
Speaker Change: Can you frame, what's giving you confidence it sounds like you have some launches in the pipeline and expanding distribution. Just can you sort of frame out what gives you the confidence to hit that sort of mid single digits, when I'm backing into sort of second half.
Morris Goldfarb: It's pretty much the same thing that I just referred to in the last question, door expansion by pretty much every retailer. We're not losing anything of merit with Tommy and Calvin. Those businesses are good. The givebacks really occur, you know, not this year; they occur a little bit the next year and the following year. So, embedded in our planning is, you know, a stable, to the extent it can be stable, Tommy and Calvin business and the growth of our own brands that are showing a good deal of strength.
Speaker Change: Pretty much the same thing.
Speaker Change: You referred to.
Speaker Change: The last question.
Speaker Change: We have.
Speaker Change: Door expansion by pretty much every retailer.
Speaker Change: We are.
Speaker Change: We're not losing anything merit.
Speaker Change: With.
Speaker Change: Tommy and Calvin those businesses are good the give backs really occur not this year they are a little bit.
Speaker Change: Next year and the following year so.
Speaker Change: Embedded in our planning.
Speaker Change: Stable.
Speaker Change: To the extent it can be stable at Tommy and Calvin business and the growth of our own brands that are.
Speaker Change: That is showing a good deal of strength.
Speaker Change: All the all the new launches.
Morris Goldfarb: You know, all the new launches and the sell-throughs are supporting pretty much our strategy and our projections. Just maybe, if I could squeeze in one more, just maybe, provide a little color on that expansion.
Speaker Change: The sell throughs are supporting pretty much our strategy.
Speaker Change: Jetson.
Speaker Change: Maybe if I could squeeze in one more just maybe provide a little color on that expansion I think you mentioned, you're expanding to 2500 more points of distribution.
Yelena Solkin: I think you mentioned you're expanding to 2,500 more points of distribution. I mean, who are you, who are you taking shelf space from? What channels are you, are you gaining shelf space in? If you could just, if you could get some color on that.
Speaker Change: Who are you taking shelf space from.
Speaker Change: What.
Speaker Change: Channels are you are you gaining.
Speaker Change: Shelf spacing.
Speaker Change: If you could just give some color on that.
Morris Goldfarb: We're taking some shelf space from some of the private label initiatives that have not expanded in some of our accounts. We're taking shelf space and expanding space with some of our own brands. And quite honestly, our pricing has become a little bit, I guess you might say that we, so the space requirements for 50% more ticket is not a big deal. So the average unit in retail on Donna Karan is 50% higher than the Calvin Klein ticket.
Speaker Change: We're taking some shelf space from some of the private label initiatives and not.
Speaker Change: Not expanded into some of our accounts.
Speaker Change: We're taking.
Speaker Change: Shelf space and expanding space.
Speaker Change: With some of our own brands.
Speaker Change: And quite honestly.
Speaker Change: Our pricing has become.
Speaker Change: Little bit.
Speaker Change: I guess you.
Speaker Change: You might say that we now have pricing power with our own brands. So the space requirements for 50% more ticket is.
Not.
Speaker Change: Not a big deal so the average unit retail on Donna Karan.
Speaker Change: Is 50% higher than the Calvin Klein.
Morris Goldfarb: So in a similar space, we're able to house, if the budget is there, with great comfort, more inventory. And we're managing our inventory well, we monitor our sales, we take our markdowns, we're aggressive and conservative, we cancel what's not selling to the extent that we can with our vendor partners. And so it's... We're comfortable with, you know, what we're putting out there. Thank
Speaker Change: So in similar space, we were able to house the budget is there.
Speaker Change: With.
Speaker Change: With great comfort more inventory.
Speaker Change: And we are managing our inventory well, we monitor ourselves we take our markdowns.
Speaker Change: We're aggressive and conservative we cancel what's not selling to the extent that we can with that with our vendor partners.
Speaker Change: So it's.
Speaker Change: So we're comfortable with.
Speaker Change: We're putting out there.
Speaker Change: Got it thank you I'll pass it on.
Will Gardner: Thank you, Will. Thank you. And our next question comes from the line of Mauricio Salerno with UBS. Your line is open. Great. Good morning.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: And our next question coming from the line of Mauricio Serna with UBS. Your line is open.
Mauricio Serna Vega: Thanks for taking my questions. First, I'd like to ask about the new partnership with AWWG. Maybe you could talk a little bit more about, you know, it seems that you're very excited about the opportunity in Europe and, you know, in India. Maybe you could remind us, like, how much European business is currently, and where you think it could go through this partnership? And then just on the growth margin, just wanted to understand, like, it seems that it was driven by, you know, just essentially mix and a lot from the go forward.
Mauricio Serna Vega: Great. Good morning, Thanks for taking my questions.
Mauricio Serna Vega: First I'd like to talk about the new partnership with any Tony WG, maybe you could talk a little bit more about it seems like youre very.
Mauricio Serna Vega: Excited about the opportunity.
Speaker Change: Europe and <unk>.
Speaker Change: Maybe if you could remind us like how much the European business is currently and where do you think it could go with this partnership.
Speaker Change: And then just on the gross margin just wanted to understand like it seems that it was driven by.
Speaker Change: Essentially mix in.
Mauricio Serna Vega: Could you remind us, like, how much of a gross margin differential you have between your go-forward brands and, you know, the PBH brands or licensing brands? Thank you. So I'm going to let Neal respond to your second question and then I'll come back.
Speaker Change: A lot of on the go forward, Mike could you remind us.
Speaker Change: How much of a gross margin differential you have between your going forward brands and on PVH brands, our licensing brands. Thank you.
Speaker Change: So I'm going to let Neil respond to your second question and then I'll come back to the first one yes.
Neal S. Nackman: Yes, Mauricio, really simply, the differential between own brands and licensed brands tends to be the royalty, and that royalty runs about 8%. So for starters, we've got an 8% lift on our own brands, and then, to the extent that that grows, we seek incremental licensing income, and of course, that's a dollar for dollar drop to our gross margin. So both of those things provide a much healthier gross margin and then operating margin for us. So, in response to the AWWG initiative and their distribution in Europe, we currently have, all told, somewhere around $400 million of European distribution between Karl Lagerfeld, Wilbur Kahn, and DKNY in its early stages.
Neil: So Morris really simply the differential between the owned brands.
Neil: And licensed brands tends to be the royalty and that royalty runs about 8%. So for starters, we've got an 8% lift on our own brands and then of course to the extent that that grows.
Neil: Seek incremental licensing income and of course, that's dollar for dollar drops to our gross margin. So both of those things provide a much healthier gross margin and then operating margin for us.
Neil: So in response to the Ww G initiative in distribution in Europe.
Neil: We have currently we have approximately.
All told somewhere around.
Neil: $400 million of.
Neil: European distribution between Karl Lagerfeld Ville broken.
Neil: DKNY in its early stages.
Morris Goldfarb: And I think if you go back a couple of years, we have cited as one of our major opportunities for go-forward growth is conquering Europe. And this is a big step for us. We've taken an equity stake in AWWG. We will grow that equity stake, double that equity stake in about 30 days, we believe.
Neil: And.
Neil: I think if you if you go back the last couple of years, we have cited as one of our major opportunities go forward growth.
Neil: As conquering Europe and.
Neil: And this is a big step for us.
Neil: We've.
Neil: We've taken an equity stake in AWD WG, we will grow that equity stake.
Neil: <unk>.
Neil: Double double the equity stake in about 30 days, we believe in.
Morris Goldfarb: And we have the ability to buy it all. And they're a dominant European distributor of three very important brands. They do about $650 million in current sales with our contribution. I think their growth will be a little bit more aggressive.
Neil: And we have the ability of buying it all in there they're a dominant European distributor of three very important brands, they do about $650 million and current sales with.
Neil: With our contribution.
Neil: I think the growth will be a little bit more aggressive.
Morris Goldfarb: Our sourcing seems to be a little bit more competitive because of the scale of our business overall. We're reviewing all the opportunities, We're going down a path of intense focus on the opportunities that sit in Europe, both in direct-to-consumer with additional digital opportunities that we've cited, as well as additional door count and outlet centers, as well as main street locations. There's a major focus on Europe, which is primarily the rationale for this acquisition. It's a great, best-in-class operating team. We have, our people have had a pretty long history with some of the leaders of AWWG.
Neil: Our sourcing.
Neil: We're seeing seems to be a little bit more competitive because of the scale of our business. Overall, we're reviewing all of the opportunities were.
Neil: <unk>.
Neil: Going down a path.
Neil: Hi intensive focus on the.
Neil: The opportunities that sit in Europe both in.
Neil: Direct to consumer.
Neil: With.
Neil: With the additional digital opportunities that we've cited as well as additional door count in outlet centers as well as main street locations.
Neil: There is a major focus on.
Neil: In Europe.
Neil: Which is primarily.
Neil: The rationale for this acquisition.
Neil: Great.
Neil: Best in class operating team.
Neil: We have our people have had.
Neil: Pretty long history with some of the leaders of AWD WG.
Morris Goldfarb: You can't ask for a better partner than Elkaterton and the team that holds the majority stake. They're aggressive, they have a mission, their mission is to make money, and we're aligned. I think we see just a major step forward in our mission of conquering Europe.
Neil: You can't ask for a better partner than L. Catterton and the team that holds the majority stake.
Neil: There.
Neil: They are aggressive they have emission their mission is to make money.
Neil: We're aligned.
I think we see.
Neil: Yes.
Neil: A major step forward in our.
Neil: And.
Neil: Our mission.
Neil: Conquering Europe.
Mauricio Serna Vega: And then just a quick follow-up on Donna Karen. It seems, you know, the brand, and the expansion are really doing very well with your partners. Do you have, and I know you, we talked about, you know, the long-term aspiration for that brand, but any thoughts on how much you think it could contribute to this year's revenue? To this year's revenue, no, where the demand is greater than our ability to service the demand, you know, production? Chasing production on new initiatives is something we don't care to do.
Speaker Change: Really helpful. And then just a quick follow up on on Donna Karan It seems.
Brian: Brian the expansion is really doing very well with your partners.
Speaker Change: You have I know you talked about the long term aspiration for that brand, but any thoughts on how much you think it could contribute to this year's revenues. Thank you.
Speaker Change: So this year's revenue now.
Speaker Change: We are.
Speaker Change: The demand is greater than our ability to service the demand.
Speaker Change: Production.
Speaker Change: Chasing for production.
Speaker Change: New initiatives is something we don't care to do.
Morris Goldfarb: We're careful about where we produce, how we produce, the piece goods that we choose. For the first time, there's a pretty good focus on hardware for many of our items, and that takes a little longer to develop and service. So we see just a killer year coming next year.
Speaker Change: We're careful on where we produce how we produce.
Speaker Change: Peace goods that we choose.
Speaker Change: For the first time there is.
Speaker Change: Pretty good focus on hardware for many of our items and that takes a little longer to develop and service.
Speaker Change: No.
Speaker Change: We see just a killer year coming next year.
Morris Goldfarb: It's supported by all the initiatives and all the steps that our team has taken to position the brand in this, took time to review the archives that were created by Donna and the brilliant team that supported Donna, and Sammy Aaron and his team brought to market just a product that is unimaginable at the price point that we're delivering. We might view it as 50% higher than a Calvin Klein product, but if you look at it that way, I think the value that the consumer is getting from Donna Karan is incredible.
Speaker Change: Supported by all the initiatives and all the steps.
Speaker Change: Our team has taken to position the brand.
Speaker Change: <unk> space.
Speaker Change: We are.
Speaker Change: We took time to.
Speaker Change: Review the archives that were created by Donna and brilliant team that supported Donna.
Speaker Change: And Sammy Aaron and his team brought to market.
Speaker Change: Yes.
Speaker Change: Product that is unimaginable as a price point that we are delivering we might.
Speaker Change: It is.
One 3% higher than the Calvin product, but if you look at it.
Speaker Change: Think the value that the consumer is getting for Donna Karan.
Speaker Change: It is incredible.
Speaker Change: The product is.
Morris Goldfarb: The product is... So well designed, so well produced, so well chosen in fabrics and materials that it could command double the retail that we're getting today, so the consumer sees it immediately, you know, we're, we're a little cautious. Historically, we were brought up to believe that, you know, a consumer walks into a retail venue and only has X amount of dollars to spend. If you give her what she wants and create excitement around it, she'll dig a little deeper.
Speaker Change: So well designed sell well produce so well chosen in fabrics and materials.
Speaker Change: That could command double the retail that we're getting today and the consumer.
Speaker Change: The consumer sees it immediately.
Speaker Change: We're a little cautious.
Speaker Change: Historically, we were brought up to believe that consumer walks into a retail venue and only has X amount of dollars to spend given what she wants.
Speaker Change: And creating excitement around it should dig a little deeper and we're finding that clearly evident in all of our touch points for Donna Karan.
Speaker Change: Great. Thanks, Thanks for the color on commercial on the results.
Speaker Change: Thank you.
Mauricio Serna Vega: And we're finding that clearly evident in all of our touch points for Donna. Great, thanks again to the caller and congratulations on the results. Thank you. Thank you. And our next question, coming from the line of Paul Kearney with Barclays. Your line is open. Hey, good morning.
Speaker Change: Thank you.
Speaker Change: Our next question coming from the line of Paul Cheng with Barclays. Your line is open.
Paul David Kearney: Thanks for taking my question. Can you talk about the sell-through trends that you're seeing at Wholesale? And then, secondarily, there are a significant number of doors being expanded. Can you talk about how you see that evolving into next year for your brands? And of that long-term 5 billion opportunity you cite, how much is new door growth?
Paul David Kearney: Hey, good morning, Thanks for taking my question.
Paul David Kearney: Can you talk about the sell through trends that youre seeing at wholesale and then secondarily. There are significant number of doors being expanded can you talk about how you see that evolving into next year for your brands and all of that long term 5 billion opportunity use site.
Speaker Change: <unk> is new door growth. Thank you.
Speaker Change: So let me.
Speaker Change: Let me clear that it's not new door growth.
Morris Goldfarb: It's not new door growth; it's new points of sale. Department stores are not growing.
Speaker Change: The new points of sale.
Speaker Change: Department stores are not growing we're not finding new doors, we're finding more space within the department stores in multiple categories.
Morris Goldfarb: We're not finding new doors. We're finding more space within the department stores in multiple categories. So when you launch,
Speaker Change: So when you launch Donna Karan you can almost immediately find.
Morris Goldfarb: Donna Karan, you can almost immediately find a dozen points of sale in every door. When you launch a horse, it's similar. So, all... All the brands, all the new initiatives are about points of sale; they're not about new doors. So I'm sorry if we've confused you to any degree.
Speaker Change: A dozen a dozen points of sale in every door.
Speaker Change: When you launch <unk>.
Speaker Change: Hassan.
Speaker Change: Similar.
Speaker Change: So all in all.
Speaker Change: All of the brands all the new initiatives are about points of sale and not about new doors. So I'm sorry, if we confused you any degree points of sale that we generally refer to not doors, the new doors for me.
Morris Goldfarb: It's points of sale that we generally refer to, not doors. The new doors, for me, are highlighted by the European and global expansion. Those, those for us are new doors, and we're working hard at cultivating new doors with multiple locations that are not typical of what designer brands do. We're creating multiple points of sale in our department stores overseas, whereas historically, or at least for the last decade or so, they have consolidated. We're, you know, we're finding opportunities where we're expanding within European doors by classification. You know, same as we do at Macy's and Dillard's and Belk and Bloomingdale's. So we're succeeding in bringing a little bit of America to Europe.
Speaker Change: Highlighted by the European and global expansion.
Speaker Change: For us a new dual endures.
Speaker Change: And where.
Speaker Change: Sure.
Speaker Change: We're working hard at cultivating new doors with multiple locations that are not typical of what.
Speaker Change: What designer brands do.
Speaker Change: We are creating multiple points of sale in department stores overseas.
Speaker Change: Whereas historically or at least for the last decade, or so they have consolidated into a collection space.
Speaker Change: Where we're finding opportunities where we're expanding within European doors classification same as we do it in.
Speaker Change: And Macy's and Dillard's and Belk and bloomingdales so.
Speaker Change: We're succeeding in bringing a little bit of America to Europe.
Morris Goldfarb: So, and I just came back from... South Korea and loved the way they were merchandising our product. The appetite for more is there. We seem to have gotten... South Korea, right?
Speaker Change: And I just came back from.
Speaker Change: From South Korea.
Speaker Change: <unk>.
Speaker Change: Love the way that we're merchandising our product the appetite for more is there.
Speaker Change: And we seem to have gotten.
Morris Goldfarb: And the good news is there's still plenty that we do wrong that we're fixing that's going to help our bottom line dramatically over the next couple of years. And I'm sorry, did I respond to your entire question, or was there another one? Yeah, the only other one was what you're seeing is sell-through trends at wholesale and kind of how that progresses. No real highlights, you know, the good news is that we're not seeing retailers being highly promotional.
Speaker Change: South Korea, right and the good news is there's still plenty that we do wrong that we're fixing thats going to.
Speaker Change: Help our bottom line dramatically over the next couple of years.
And I'm, sorry did I respond to your entire question or is there.
Speaker Change: The other one was.
Speaker Change: What are you seeing a sell through trends.
Speaker Change: Wholesale kind of how that progressed through the quarter no no real highlights.
Speaker Change: The good news is we're not seeing retailers being highly promotional.
Morris Goldfarb: We're not seeing sales out there, you know, but the average unit of retail has gone up from last year, which is good news. We like it when our retailers make money. That's a true partner.
Speaker Change: We're not seeing sales out there.
Speaker Change: Average unit retails.
Speaker Change: Have gone up from last year, which is good news, we like it when our retailers make money.
Speaker Change: That's a true partner.
Paul David Kearney: And as I mentioned before, Donna Karan is outselling or turning better than our other brands for the moment, but it doesn't have the penetration of inventory that some of our more mature brands have. Can't wait till we get the scale up in Donna Karan and Aaron Neumann. That'll be good.
Speaker Change: And.
Speaker Change: As I mentioned before Donna Karan is outselling.
Speaker Change: <unk>.
Speaker Change: Turning better then.
Speaker Change: Our other brands for the moment.
Speaker Change: But.
Speaker Change: It doesn't have the doesn't have the penetration of inventory that some of our more mature brands have so can't wait till we get the scale up and Donna Karan and our new initiatives that'll be a good day.
Paul David Kearney: Thank you. Best of luck. Thank you. Thank you. And our last question in queue comes from the line of Dana Telsey with Telsey Advisory Group. Your line is open.
Speaker Change: Thank you crosswalk.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: And our last question in queue coming from the line of Dana Telsey with Telsey Advisory Group. Your line is open.
Dana Lauren Telsey: Hi, good morning everyone, and nice to see the progress. As you think of the portfolio, and obviously, we've spoken about Donna Karan, I saw it in Macy's right when you get off the escalator, great positioning, whether it's in handbags or apparel. What are you seeing with the rest of the other brands, Morris, whether it's Karl Lagerfeld, Nautica, Halston? How are you seeing those and the progress as we go through the year?
Speaker Change: Hi.
Speaker Change: Good morning, everyone and.
Dana Lauren Telsey: Nice to see the progress as you think of the portfolio.
Dana Lauren Telsey: We've spoken about Donna Karan I've seen it in Macy's right when you get off the escalate a great positioning whether from handbags or apparel.
Dana Lauren Telsey: Are you seeing with the rest of the other brands Morris, whether it's Karl Lagerfeld Monica Halston, how are you seeing from the progress as we go through the year and then when you think about just today's trends. It does seem newness and innovation driving demand. What are you seeing from your brand and is it helping you deliver or get it better.
Dana Lauren Telsey: And then when you think about just today's trends, there does seem to be newness and innovation driving demand. What are you seeing from your brand, and is it helping you deliver or get a better AUR? Thank you. So, thanks for your question, Dana. And thanks for citing the locations.
Speaker Change: Thank you.
Speaker Change: So thanks for your question Dana.
Speaker Change: Thanks for signing the locations.
Speaker Change: No.
Morris Goldfarb: We have an entire team that fights very hard for appropriate locations within department stores. We're not simply satisfied by being given an order. We fight hard for what the visuals of the product are going to look like, whether it's a store build-out, whether it's a location near the escalator or behind the bathroom. We all know where you want to be. But not everybody can be there.
Speaker Change: Where our products fit.
Speaker Change: We have an entire team that's.
Speaker Change: Very hard for appropriate location within department stores.
Speaker Change: We're not simply satisfied.
Speaker Change: Being given an order we fight hard for what what the visuals of the product theyre going to look like whether it's a slower build outs, whether it's a location.
Speaker Change: Near the escalator or behind the bathroom, we all know where you want to be not everybody can be there. We succeed in most cases of fighting the battle and maintaining the space one of our best assets.
Morris Goldfarb: We succeed in most cases in fighting the battle and maintaining the space. One of our best assets is the field merchandisers that we have. We have several hundred field merchandisers that are in department stores. They're on our payroll. They're trained by us.
Speaker Change: As the field merchandisers that we have we have several hundred field merchandisers that.
Speaker Change: Our in Department stores, they are on our payroll theyre trained by US They report to us and they stay.
Morris Goldfarb: They record for us, and they spice up the inventory. They assure us that inventory is in the right place. There's so much traffic in department stores that the spaces at the end of the day are in total disarray.
Speaker Change: Spice up the inventory they assure us in.
Speaker Change: That inventory is in a right position there is so much traffic in department stores that the space is at the end of the day is in total disarray, and we're not managing and improving the appearance of not only the location, but the visuals of how the product looks.
Morris Goldfarb: If we're not managing and improving the appearance of not only the location but the visuals of how the product looks, we're not doing our job, we're not helping the retailer, and we are doing it. We spend probably $25 million a year on this staff of people, and it's worth every penny. So that'll go for locations.
Speaker Change: Not doing our job, we're not helping the retailer.
Speaker Change: And we are doing our job we spend.
Speaker Change: Probably $25 million a year on this staff of people.
Speaker Change: And it's worth every penny.
Speaker Change: So that'll that'll Gulf or locations as far as your question on.
Dana Lauren Telsey: As far as your question on our other brands, the progress of Karl Lagerfeld is off the charts. We're probably going to close to double the size of that business in North America, where, you know, we have it. Great sell-through. We've added and improved on design, we've sourced more effectively, better products, and, quite honestly, at better prices in many cases. So, you know, we're on a solid path to build what we thought we could build, which is taking one of the premier designers of our world, or any world, and he's iconic, Karl, call him as you couldn't, you couldn't choose, a more important designer of this era to, you know, be the brand that you want.
Speaker Change: Our other brands.
Speaker Change: <unk>.
Speaker Change: The progress of Karl Lagerfeld is off the charts.
Where we are.
Speaker Change: They're going to close to double the size of that business in North America. This year.
Speaker Change: We've got.
Speaker Change: Great sell throughs.
We've added an improved on design.
Speaker Change: We've sourced.
Speaker Change: More effectively.
Speaker Change: Better product and quite honestly.
Speaker Change: At better prices in many cases.
Speaker Change: So.
Speaker Change: We're on a solid path to build.
Speaker Change: We felt we could build which is taking one of the premier designers.
Speaker Change: <unk>.
Speaker Change: Our world any world.
Speaker Change: He's iconic Carl.
Speaker Change: While you Couldnt you couldnt choose.
Speaker Change: A more important designer of this era too to be.
Speaker Change: Be the brand that you market.
Dana Lauren Telsey: We're going to see a little bit of that. Hopefully. I have not seen the series, but you know the series starts to come out Saturday, I believe it's funded by Disney on Hulu. So hopefully that's an add-on for us, and there's another movie.
Speaker Change: We're going to see a little bit of that hopefully I have not seen the series, but the series come start to come out.
Speaker Change: Saturday I believe.
Speaker Change: Funded by Disney on Hulu.
Morris Goldfarb: You know behind it Not not as quickly as I thought the writer's strike and some other impediments held that back a little bit. But we have another movie coming with Jared Leto within the next 12 months, I believe. So there's lots of stuff that's following on Carl. We have a lot of paid marketing. There's not a day that an editorial is not written about Carl.
Speaker Change: So hopefully that's an add on for us and there is another movie behind it.
Net net.
Speaker Change: Not as quickly as I thought the writer's strike and some other impediments held that back a little bit, but we have another movie coming with.
Speaker Change: Jared Leto.
Speaker Change: Within the next 12 months I believe so there is lots of stuff. That's following on call. We have a lot of paid marketing there is not a netted to a day that an editorial is not written about Carl.
Morris Goldfarb: So we love the brand. We love the sell-through of the brand. We had some hiccups in the early stage, with design and the team that supported design. Today, we're on a clear path to success, and the integration of the European team and the American team is working well, a joint collaboration in design as well as sourcing, all kind of working the way we wrote the script and DKNY. DKNY has picked up its pace as well.
Speaker Change: So we love the brand we love the sell throughs of the brand we had some hiccups in the early stage.
Speaker Change: <unk> design and the team that supported design today, where we're on a clear path to success.
Speaker Change: And the integration of.
Speaker Change: The European team and the American team is working well.
Speaker Change: <unk>.
Speaker Change: As a joint collaboration and design as well as sourcing.
Paul.
Speaker Change: Okay.
Speaker Change: All kind of working the way we wrote the script.
Morris Goldfarb: DKNY is, today, the second most important brand, and we believe it's got plenty of runway. Clearly, globally, in North America, we've... We've done incredibly well at marketing DKNY, the brand, and the underlying categories within it. So. Hope I'm not getting too wordy. We're not a monobrand manager.
Speaker Change: And DKNY.
Speaker Change: DKNY is.
Speaker Change: Picked up its pace as well DKNY is.
Speaker Change: Today.
Speaker Change: <unk> most important brand.
Speaker Change: And we we believe.
Speaker Change: It's got plenty of runway.
Speaker Change: Nearly globally.
Speaker Change: North America.
Speaker Change: We've done incredibly well.
Speaker Change: Marketing DKNY and the brand and the underlying categories within the brand.
Speaker Change: So.
Speaker Change: Hope I'm not getting too wordy, we have we're not a mono brand manager we have lots to talk about we have lots of pieces in there.
Morris Goldfarb: We have lots to talk about. We have lots of pieces in our what we look at. It's kind of a simple puzzle.
Speaker Change: We look at it it's kind of simple puzzle hopefully youre understanding at all.
Morris Goldfarb: Hopefully, you're understanding it all. Hopefully, you're seeing the strategy come into fruition. And we couldn't be happier as to where we are today. We've got capital to grow. We're not a highly levered company. We've got investors that are sitting on the sidelines waiting for us to call them for money or a deal. We're in demand. We're a company that's in high demand from the investor point of view as well as the retailer point of view, and... We're in a good spot.
Speaker Change: Hopefully you are seeing this strategy come into fruition and.
Speaker Change: We couldnt be happier as to where we are today, we've got capital to grow.
Speaker Change: We're not we're not a highly levered company we've got.
Speaker Change: Investors that are sitting on the sidelines waiting for us too.
Speaker Change: To call them for for money or deal with where we're at.
Speaker Change: And a demand.
Speaker Change: Yes.
Speaker Change: We're a company that's in the high demand from the Investor point of view as well as the retailer point of view is.
Speaker Change: We're in a good spot.
Paul David Kearney: Thanks, Paul.
Dana Lauren Telsey: Thank you. Dana, thank you for your question and with that, I wish you all a great day and look forward to speaking to you again in September. Ladies and gentlemen, that does conclude our conference for today. Thank you all for your participation and you may now disconnect. ??? ??? ??? ??? ??? ??? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? [inaudible] ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ??
Speaker Change: Dana Thank you for your question.
Paul David Kearney: And.
Paul David Kearney: With that.
Paul David Kearney: I wish you all a great day and look forward to speaking to you again in September.
Paul David Kearney: Okay.
Speaker Change: Ladies and gentlemen that tussle teleconference for today. Thank you all for your participation and you may now disconnect.
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